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COMMISSION ON AUDIT CIRCULAR NO.

95-006
May 18, 1995

TO

All Heads of Departments, Chiefs of Bureaus and Offices of the National


Government; Managing Heads of Government-Owned and/or Controlled
Corporations, Self-Governing Boards and Agencies; Heads of Authorized
Depository Banks; The Treasurer of the Philippines; Provincial Governors and
City/Municipal Mayors; Provincial/City/Municipal Treasurers and General
Services Officers; Chief Accountants/Heads of Accounting Units of All
Government Agencies; Heads of Auditing Units and All Others Concerned.

SUBJECT

Total lifting of pre-audit on all financial transactions of the National Government


agencies, government-owned and/or controlled corporations and local
government units.

1.0

PURPOSE
1.01

2.0

In pursuance of the constitutional mandate vesting in the Commission on Audit


the exclusive authority to define the scope of its audit and examination, establish
the techniques and methods required therefore, and promulgate accounting and
auditing rules and regulations (Sec. 2[2], Art. IX-D 1987 Constitution), this
Commission hereby lifts all pre-audit activities presently being performed on
financial transactions of national government agencies, government-owned
and/or controlled corporations and local government units. For purposes of clarity
and convenience, this circular restates and supersedes all previous issuances
dealing on the lifting of pre-audit.

HISTORICAL BACKGROUND
2.01

Section 2 of Presidential Decree No. 1445, which is substantially reiterated in


Section 1, Chapter I, Title I-B, Book V, of the Administrative Code of 1987,
provides that " all resources of the government shall be managed, expended or
utilized in accordance with law and regulations and safeguarded against loss or
wastage resulting from illegal or improper disposition, with a view to ensuring
efficiency, economy and effectiveness in the operations of government. The
primary in the responsibility for faithful adherence to this policy rests with the
chief or head of the government agency concerned".

2.02

Consistent with such policy, this Commission under COA Circular No. 82-195
dated October 26, 1982, lifted the pre-audit of government transactions, with
certain exceptions. Upon the change of administration after the February, 1986
revolution, however, the audit of financial transactions entered into during the
past regime uncovered irregularities and anomalies of grave proportions. In order
to prevent further dissipation of government resources, this Commission, under
COA Circular No. 86-257 dated March 31, 1986, as amended, instituted pre-audit
of selected government transactions. In the light of the changes occurring at that
time, selective pre-audit was perceived to be an effective, albeit temporary,
remedy against the recurrence of the observed maladies.

3.0

2.03

Subsequent developments required the re-assessment of this Commissions


policy on pre-audit. With the normalization of the political system and the
stabilization of government operations, there was a need to re-affirm further the
concept that fiscal responsibility resides with management, as embodied in the
Government Auditing Code of the Philippines. In addition, this Commission feels
the need to contribute further in accelerating the delivery of public services and
improving the operations of government by curbing undue bureaucratic red tape
and ensuring facilitation of government transactions, while continuing to preserve
and protect the integrity of these transactions.

2.04

On the basis of the results of such re-assessment this Commission gradually


lifted the pre-audit of financial transactions of national government agencies,
government-owned and/or controlled corporations and local government units
under several issuances, the last of which was COA Circular No. 94-006, dated
February 17, 1994. These issuances however did not include some pre-audit
activities on the financial transactions of the government agencies pending
further study and evaluation on the adequacy of the internal control system on
the matter.

COVERAGE
3.01

4.0

This Circular shall apply to financial transactions, irrespective of amount, of all


agencies of the National Government, government-owned and/or controlled
corporations and local government units. Such transactions shall include but
shall not be limited to contracts or undertakings for procurement of supplies,
materials and equipment; infrastructure and other construction projects; rent or
lease and repair and maintenance of equipment, motor vehicles, physical
facilities and similar items; consultancy and other related services; janitorial,
security and other similar services; and sale of government property/assets
which have become unserviceable or no longer needed.

GENERAL RULE ON THE AUDIT OF FINANCIAL TRANSACTIONS


4.01

The pre-audit of all financial transactions of national government agencies, local


government units and government-owned and/or controlled corporations
involving implementation/prosecution of projects and/or payment of claims is
hereby lifted without exception. These transactions shall be subject to post-audit
by the Commission on Audit or its representatives.

4.02

Pre-audit activities shall henceforth be the responsibility of the agencies


concerned as provided in par. 6.01 hereof.

4.03

Whenever circumstances warrant, however, such as where the internal control


system of a government agency is inadequate, this Commission may reinstitute
pre-audit or adopt such other control measures, including temporary or special
pre-audit, as are necessary and appropriate to protect the funds and property of
the government.

5.0

ENUMERATION OF PRE-AUDIT ACTIVITIES LIFTED


5.01

All audit activities heretofore undertaken by this Commission or its


representatives in the form of pre-audit including those provided in international
agreement, are hereby lifted. The following and other such similar audit activities
previously performed by COA Auditors shall not be pre-requisites to
implementation/prosecution of projects, perfection of contracts, payment of
claims, and/or approval of applications filed with the agencies:
5.01.1

Review and evaluation of contracts;

5.01.2

Evaluation of on-going infrastructure and other construction projects


which shall include field inspection to verify actual project
accomplishment or status;

5.01.3

Evaluation of the need for and extent of repair to be made on


equipment, including motor vehicles, and infrastructures.

5.01.4

Inspection of deliveries of foodstuffs, medicines, supplies, materials,


equipment and the like.

5.01.5

Verification of the certificate as to the availability of funds.

5.01.6

Witnessing of the opening of bids.

5.01.7

Audit of cash advances of whatever nature and account.

5.01.8

Verification of Request for obligation of Allotment (ROA);

5.01.9

Audit of journal vouchers;

5.01.10 Verification of the schedule of accounts payable;


5.01.11 Audit of refunds of whatever nature and amount.
5.01.12 Review and evaluation of government contracts for auditing, accounting
and related services.
5.01.13 Processing and review of documents relative to the acquisition of real
property by the government for public use.
5.01.14 Witnessing of condemnation/destruction, and approval of negotiated
price, of unserviceable government property and other disposable
assets of the audited agencies.
5.01.15 Observation of the proceedings of the Local Prequalification, Bids and
Awards Committee (PBAC) and issuances of certification that the rules
and procedures for prequalification, bids and awards, have been
complied with (Sec. 37, Chapter 5, Title I, Book I, R.A. 7160).
5.01.16 Verification of applications for bond and for Fiscal Agency Service;

6.0

DUTIES AND RESPONSIBILITIES OF AGENCY OFFICIALS


6.01

Pre-audit activities shall henceforth be considered as part of the agency's


accounting and fiscal control process. Being a primary responsibility of the
agencies, an adequate internal control system shall be instituted in order to
achieve economy, efficiency and effectiveness in the management and utilization
of the agency resources.

6.02

The head of the government agency concerned shall define or delineate the
duties and responsibilities of its officials and employees involved in financial
transactions. The responsibility to request and/or issue clearances, notices,
advises, or reports heretofore lodged in the Auditor in connection with the preaudit of disbursement and countersigning of Treasury Warrants/Treasury Checks
shall henceforth be assumed by the agency personnel concerned.

6.03

Accountable officers shall submit the records receipts, disbursements,


expenditures, operations, and all other transactions, together with the supporting
documents, to the Chief Accountants in the manner and within the time frame
prescribed in existing rules and regulations.

6.04

Disbursing officers in particular shall faithfully comply with Section 100 of


Presidential Decree No. 1445 which require them to render monthly reports of
their transactions pursuant to existing auditing regulations not later than the fifth
day of the ensuing month to the auditor concerned.

6.05

The official involved in the daily recording of transactions in the books of


accounts shall turn over the receipts and the disbursement records with all paid
vouchers and documents evidencing the transaction to the Auditor within ten (10)
days from date of receipt of said documents.

6.06

The official responsible for or in charge of accepting deliveries of procured items


shall, within twenty-four (24) hours from such acceptance, shall notify the auditor
of the time and date of the scheduled deliveries.

6.07

Where the period for submission of reports and documents prescribed in


paragraphs 6.03 and 6.04 above cannot be met, as in the case of accountable
officers stationed in other countries, the head of the agency concerned shall
submit the corresponding request for exemption to the Chairman, Commission
on Audit, thru the Auditor, stating the reasons therefor, and the recommended
periods for such submission.

6.08

Pre-repair evaluation shall be performed by management, furnishing a copy


thereof to the Auditor within five (5) days from date of evaluation/inspection.

6.09

Inspection of consumable and perishable items, as well as unserviceable and


disposable government property and others assets, shall be conducted by
management. A copy of the report of inspection or its equivalent shall be
submitted to the Head of the Auditing Unit within twenty four (24) hours from

acceptance of the items delivered and, in the case of unserviceable and


disposable property/assets, immediately after inspection thereof by management.

7.0

6.10

Management shall furnish the Auditor with a copy of the schedule or notice of
opening of bids and condemnation/destruction of government property and other
disposable assets, as the case may be, at least five (5) days before the
scheduled time.

6.11

The concerned officials of the local government units shall furnish the local
auditor with a copy of the rules and procedures for prequalification, bids and
awards, and notify the latter of the scheduled meetings of the local
Prequalification, Bids and Awards Committee (PBAC) at least five (5) days
before its meetings and opening of bids.

FAILURE TO SUBMIT REPORTS


7.01

8.0

REPEALING CLAUSE
8.01

9.0

Unjustified failure on the part of the official or employee concerned to submit the
documents and reports mentioned herein shall be considered a ground for the
automatic suspension of payment of this salary until he shall have complied with
the aforesaid requirements, without prejudice to any disciplinary action that may
be instituted against him (Sec. 122, P. D. 1445).

This Circular supersedes, amends or modifies all existing COA issuances


inconsistent herewith. COA Circulars reinstituting pre-audit activities in some
particular agencies of the government are likewise hereby superseded.

EFFECTIVITY
This Circular shall take effect on May 18, 1995.

(Sgd.) CELSO D. GAGAN


Chairman

(Sgd.) ROGELIO B. ESPIRITU


Commissioner

(Sgd.) SOFRONIO B. URSAL


Commissioner